Archive for November 2008

A Darling Pre- Budget Christmas?

November 25, 2008

 

 

So far, it seems that most people will gain from the tax cuts proposed yesterday– but possibly only in the short-term.  And does a 2.5% off a bottle of wine mean we are all going to rush out and take advantage if we are already feeling the pinch?  It is more possible that the public will lose out from the National Insurance increase, and Chancellor Alistair Darling has been already accused of taking huge risks with public finances.

 

 

The pre-Budget unveiling yesterday has caused a huge reaction from opposition parties and the general public.  In his announcement, Mr Darling proposed to cut VAT from 17.5% to 15%, with effect from next Monday the 1st December.  This cut will remain for 13 months until the beginning of 2010, when it will revert to 17%.  Other plans are for slightly later: from 2011, National Insurance will go up by 0.5% and the high income bracket will be affected by a 45% tax rate on earnings over £150,000.  Borrowing will hit a record level of £118bn – not hitherto reached.  The Conservative party have reacted by calling for a full detailed parliamentary debate on Mr Darling’s announcement.  Fair enough that they should they want to go over with a fine-toothed comb who will gain and most crucially who will lose out and what the long-term consequences will be. 

 

What is clear is that this pre-report is going to have a clear impact on how the we will react at the next election – and Mr Darling has also admitted that this will be the case.  The question will be – who do we trust to take us through the this dark financial time and lead us into the better times beyond?  We want this gruelling period to be over with as soon as possible, who will do the job best?  Can Labour fix the financial wound with this drastic “rescue” package, or are they to blame for the damage caused by the relatively halcyon days of the last 10 years?  It will be very interesting to weigh up David Cameron’s reaction and whether he will come up with a proposal that sounds more appealing.

 

Source: get more finance news and info at http://www.whichwaytopay.com

 

 

Recession – Pause for Thought

November 18, 2008

 

So recession in the UK is set to be worse than first predicted, with figures released today showing that inflation has reached its highest level in 16 years.  Fuel and transport costs have been partially blamed, a fact that can be backed by the infamous Stelios, boss of Easyjet, who today announced a fall in profit for the budget airline giant – down by 45%.  This despite an increase in the amount of passengers they carried in the last year.  The Bank of England is likely to cut rates again in December, after already having lowered them to 4.5% in October, the lowest level in over half a century!  Mervyn King has even predicted that inflation could fall below the target amount of 2% in 2009.  So what would a period of deflation mean for the UK? Well, a short period wouldn’t be too bad, but a longer period could have a severe impact – and make the already shaky economy shrink even further. 

 

This kind of news is now hitting our headlines on an at least once – daily basis, with last week seeing recession entry first by Germany, followed by Italy and Spain culminating in a grand finale of the entire Eurozone’s official entry by the end of the week.  Then we had a weekend of hope at the G20 summit in Washington, with most leaders coming away with positive feedback and fresh impulse to slay the dragon of world recession.  Finally some light relief – which was closely followed by another giant falling foul of the crisis: Japan announced their entry on Monday.  

 

We could really be described as a living on a roller coaster ride at the moment, and with Christmas just weeks away we are set for an interesting holiday period.  There is one place that the economic climate is perfectly reflected – namely the foreign exchange market.  There you can view how instantaneous things can go from one extreme to another.  Keeping tabs on market data feeds is currently fascinating, seeing how the news affects the various world currencies.  There are of course some currencies that are named “safe havens” – the Swiss Franc for example will always be something of a comfort blanket to traders, so those new to foreign exchange could consider that as their first port of call.   But observing how pictorially the world’s largest liquid market shows the ups and downs we are experiencing can be educational as well as a useful way to reflect our own habits.

 

This period could be especially interesting, for example, to the age group who have never experienced such global hardship first hand – the 16 to 24s.  Born around or just after the last slump in the 80s, this group have already been quoted as being relatively unconcerned by the crisis, and intend to spend as they would normally this Christmas dealing with the consequences later.  Perhaps this climate will be good to teach our young to curb their spending habits and learn how to budget?  Who knows, but it is important to take a step back to look at the situation in a less panic-stricken way and try and take some perspective.  Only than can we learn and take those lessons with us into the future, for goodness knows we’ll need them in the time to come before the situation heals.